A financial audit is an independent, objective examination of an organization's financial statements. The primary purpose of this process is to provide an opinion on whether the financial statements are presented fairly, in all material respects, in accordance with a specific financial reporting framework. In the United States, this framework is the Generally Accepted Accounting Principles (GAAP). The audit lends credibility to the financial statements, assuring stakeholders like investors and creditors that the information is reliable and conforms to established accounting standards.

A. Operational audit: This type of audit evaluates the efficiency and effectiveness of an organization's operating procedures and methods, not its adherence to GAAP.

B. Principal audit: This is not a standard, recognized term for a type of audit in professional accounting or supply management literature.

D. Functional audit: This audit focuses on a single department or business function (e.g., procurement, marketing) to assess its performance, which is a different scope than a company-wide financial statement review.

1. Whittington

O. R.

& Pany

K. (2019). Principles of Auditing & Other Assurance Services (21st ed.). McGraw-Hill Education. Chapter 1

"The Role of the Public Accountant in the American Economy

" defines a financial audit as an audit of the financial statements of an entity to determine whether they are stated in accordance with specified criteria

typically U.S. generally accepted accounting principles.

2. MIT Sloan School of Management. (2004). 15.511 Financial Accounting

Fall 2004. Lecture Notes: The Audit Process. MIT OpenCourseWare. Retrieved from https://ocw.mit.edu/courses/15-511-financial-accounting-fall-2004/resources/lec12auditproc/. This course material explicitly states

"The purpose of an audit is to provide an opinion on whether the financial statements are presented fairly in conformity with GAAP."

3. Arens

A. A.

Elder

R. J.

& Beasley

M. S. (2016). Auditing and Assurance Services (16th ed.). Pearson Education. Chapter 1 distinguishes between financial audits

operational audits

and compliance audits

clarifying that only financial audits are primarily concerned with GAAP conformity for financial statements.